Blue Sky Alternative Investments (ASX: BLA) has requested an extension on its trading suspension as it continues to prepare a response to a short seller's report that alleges the company has exaggerated its assets under management (AUM) and its share price is only worth one fifth of its current value.
The Brisbane-based company went into a trading halt last Wednesday after the Glaucus Research report was released which sent BLA shares down sharply by 16 per cent at one stage. When trading was halted they recovered to be down by 9 percent at $10.40.
The short selling hedge fund says its analysis estimates that Blue Sky's AUM does not exceed $1.5 billion, 63 per cent less than the company's reported figure.
"We believe that Blue Sky is significantly overstating its fee earning assets under management by reporting the gross value of certain assets as assets under management instead of the fair value of the capital invested," Glaucus says.
Glaucus also claims Blue Sky may be compensating for its overstated assets under management by charging clients egregious management fees and estimated that BLA shares are actually worth $2.66 per share.
In February, Blue Sky's CEO Robert Shand (pictured) delivered a first half underlying profit by 59 per cent to $16.1 million and reported its its fee-earning AUM rose by $1.2 billion to $3.9 billion.
The company also said it was targeting AUM of between $5.5 billion and $6 billion by June 30, 2019, with the growth to be driven by demand from institutional investors.
Previously Glaucus launched a similar damning report on the now-collapsed sandalwood grower Quintis, saying in March 2017 that the company had a "ponzi-like structure".
That research prompted the price of the stock to plunge and receivers were appointed to Quintis in January of this year.
Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Get our daily business news
Sign up to our free email news updates.
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support